It’s extremely important to get children started on the path to financial success when they’re younger! This helps make a positive impact on how children view their finances now and in the future.
A question I hear a lot is, “What can I do to help teach my kids/nieces/grandchildren how to save and the importance of saving their money?”
If teaching your child about the ins and outs of finances seems intimidating, Pelican is here to to tell you, you are not alone! Our Nationally Certified Credit Counselors know the time is always right to begin the conversation about financial literacy.
The following skills can teach them to not only save, but also achieve a savings goal with a reward at the end. These tips are an educational and fun way to help your children feel a sense of accomplishment!
Financial Skill #1 – Earning
Before teaching kids what to do with money, it’s best if they earn the money themselves. Earning money is the first step of learning to be financially responsible.
For younger children, earning money can be in the form of a weekly allowance by completing chores or other projects you assign around the house. For older children, they may be ready for their first job or can even start their own business.
Some easy-to-start business ideas for kids include:
- Babysitting a relative or friend of the family (if age permits)
- Household chores at home or for family friends
- Sitting with an elderly relative while they are alone (if age permits)
- Dog walking or animal sitting
The next earning lesson to focus on is managing payday. When your child gets paid, remember to teach them the difference between wants and needs and how they should spend their hard-earned money. They should remember to save at least 10% of their earnings. This will teach responsibility and the concept of saving at the same time.
Having initial conversations about these topics as they begin to earn money:
- Where will the money be kept?
- How much will be spent on things you need vs. things you want?
- How much will be saved?
Financial Skill #2 – Saving
In order to teach children how to save money, they need an understanding of the value of money! Whatever funds they receive, make a habit of having them to put a certain percentage away to save.
Make an outing and bring them to a local credit union every two weeks to deposit their savings. This will help them become familiar with financial institutions, increasing their knowledge and awareness. Have them save for a specific purpose or project (like purchasing a pair of tennis shoes). Parents may offer a challenge to match their child’s savings on a monthly basis. Pay your child for every “A” on their report card and encourage them to save a certain percentage!
Developing the concept of the three major uses of money (spending, saving, and sharing) is an easy lesson for small children to embrace.
How to Teach The Three “S” Concepts
The three “S” concepts align with the social skills they are learning—spend part of their money, save part of it, and share a portion with people or charities that need it.
In most cases, having established this understanding of money early in life produces an adult who will be able to manage their household expenses and maintain a great credit history. This financial education will definitely prove rewarding as well as beneficial to children and their parents in their future.
Helping your kids establish goals makes the learning easier! Kids can save for:
- Tennis Shoes
- School Activities
- College or Technical School
Financial Skill #3 – Budgeting
If your child is already earning money, the next best thing you can do for them is to teach them the importance of managing it responsibly!
Follow these steps to help your kids establish goals and create a spending (and saving) plan of action.
Step 1: Choose the Type of Goal You’re Setting
How long do you expect it will take to accomplish your financial goal? Choose one of these goal types:
- Short-term goals: Within 3 months
- Intermediate-term goals: 3 months to a year
- Long-term goals: More than a year to achieve
Step 2: Get SMART about Your Goals
Learning to identify and set clear goals is the key to your financial success in life.
SMART goals are:
Step 3: Create a Spending Plan or Budget
Once you determine your goal, you must create a spending plan. This includes keeping a log of your income and expenses daily.
Some questions to have your kids consider when creating a spending plan or budget are:
- How much money do you earn each week?
- How much money do you spend each week?
- Do you owe anyone money?
While taking a look at regular expenses, have your kid track expenses like bills using our bill payment schedule. Download it here!
Step 4: Assess Needs vs. Wants
It’s important to ask yourself if you need it or want something. Needs are very basic things we must have to survive and wants are things that make life more interesting and fun.
Everyone has wants, but when you don’t have the money, needs have to come first. Here are some examples of needs and wants to share with your kids:
Financial Skill #4 – Investing
The best place to start when teaching your children about finances is by opening them a youth savings account. Getting them established with an account to hold their money safely can give them Let’s discuss how they can grow their savings with an account!
There are plenty of reasons why opening a youth account is one of the best tools you can use to get your kid set up for financial success:
It creates a fun and educational experience.
Children will become more familiar with financial institutions as they deposit or withdraw from their account. Having a savings account of their own can help your child learn how to use their money responsibly.
It teaches the value of money.
Learning the value of money and the importance of saving helps avoid instant gratification. This is an important lesson learned through saving and budgeting.
It encourages kids to set financial goals.
Saving money to buy something like a new toy, game, or cell phone is an excellent way to teach kids about setting financial goals!
This will help them learn how to plan and save for things they want, but only until they can afford it. They will be able to watch their savings grow over time and reap the amazing reward of their goal in the end!
It establishes a financial path.
A youth savings account is an important step to becoming responsible with your money as you enter adulthood. It helps you gain full control of your spending, get a better understanding of your wants and needs, and learn how to save for the future.
Establishing these healthy habits early will lead to greater peace of mind and confidence on your kids’ financial journey.
Financial Skill #5 – Building Credit
Teach your kids the ins and outs of building credit early. We always say it’s never too early to talk about credit and the impacts it can have on your kids’ future.
Here are all the topics and tips you can cover to hold your kids accountable with their finances:
As a parent or guardian, you have an opportunity to be a positive influence on a child’s future financial well-being! Involvement in your children’s financial education has long lasting effects, and Pelican is here to help you through every step of the way!
If you would like to speak with a Nationally Certified Credit Counselor or have your kid talk with them about finances, you can sign up here!
How are you teaching your kids to be money smart?
Once a Pelican State CU member, always a member—through life’s milestones, we’ll always be there to help you with your financial needs. Your Financial Family for Life. Give us a call at 800-351-4877.